The difference between growth and scaling and why it matters

It may seem that in today’s corporate environment, very few concepts are of greater importance than growth. Even the oldest players on the stock market are evaluated based on their quarterly growth rates, and failing to deliver can have disastrous consequences for any enterprise.

However, there is a significant focus on scale among younger businesses, notably startups.

How can a company not just expand but expand exponentially?

Exponential expansion frequently amounts to putting a greater emphasis on the product itself, forging a distinctive brand identity, and learning the market before considering hypergrowth.

We’ll get back to this idea later.

The distinctions between the concepts of scaling and growing will be introduced in this article. Additionally, we’ll discuss some of the significant difficulties scaling businesses face and what they can do about it.

Growth versus upscaling

Let’s start by setting the record straight, explicitly addressing the difference between these two concepts of growth and upscaling. Typically, we conceive of growth in terms of a linear process: a business adds more resources (money, people, or technology), and as a result, its revenue grows.

Scaling, in contrast, refers to a growth in income without a significant increase in resources. Simply, processes “that scale” can be carried out in bulk without adding extra work. For example, one’s effort is practically the same whether he sends an email to 1 recipient or 1 million, which explains why many businesses are so into email marketing. It scales up so well.

Or, as another illustration, consider a firm that expanded operations by only converting to a cloud-based phone system.

But this just clarifies the two terms’ technical differences. Let’s examine each in more detail to see how it functions.

Expanding a company

Growth is the term used to describe an organization’s ability to generate more money while operating. It can also relate to expanding business components, such as the number of staff members, locations, and clients it services; these things are nearly always associated with increased income.

The primary issue is that maintaining steady development requires lots of resources.

Consider a legal agency that works with five business clients and is getting ready to onboard ten more. The agency will make more money if it caters to more businesses, but it probably won’t be able to complete the necessary tasks without adding extra staff.

As a result, achieving monetary expansion results in an increase in the corresponding losses.

As mentioned, professional service providers like legal or advertising agencies will constantly face this issue. Expanding clientele boosts income and raises costs since hiring additional staff to service those clients is necessary.

Scaling a company

Modern founders fixate on scaling due to the high costs involved with growing.

The main distinction between scale and growth is that scale is accomplished by raising income without posing a significant expense. Costs should only rise gradually, if at all, as consumers and revenue expand rapidly.

The distinction between growing and scaling is most apparent when a business is no longer a startup but not a large corporation. At this pivotal point, the firm must choose between continuing to grow at its current rate or converting to quicker corporate scaling.

It must be done without incurring significant overhead if it has any chance of long-lasting effect on the industry and society.

Unfortunately, there is no easy route to effective scaling, as then every other person would be running a multi-million-dollar business. However, there are a few considerations to consider.

Scaleups vs startups

These are additional terms that are also often misunderstood. Let’s look at how does a scaleup differs from a startup, something you already undoubtedly understand?

Generally speaking, a scaleup is a startup that has passed the product-market fit stage and is either in the second valley of death or experiencing exponential growth.

In other words, it is time to market a startup’s product to the general public once it has demonstrated that it has an effect that people desire. This often necessitates a sizable investment in new personnel, offices in several regions, and advertising by holding informative webinars, participation in trade exhibitions, lead generation, and other strategies.

This seems to go against our prior definition of “scaling,” which is an increase in income without a corresponding increase in investment. However, a scaleup will only require a linear or minimal investment to add exponential growth if it is effective. Essentially, a scaleup will expand faster than was conceivable if it can open new markets and connect with new consumers.

Important issues for scaleups

Several patterns identified by recent studies may alarm CEOs. First off, two-thirds of the firms with the quickest growth fail. You may believe that achieving hypergrowth status places you on an unavoidable path to success, but the evidence proves otherwise.

In contrast to their fast-growing rivals, slow-growing businesses often do better over the long term, according to other macro studies.

This doesn’t mean one shouldn’t aspire to develop quickly—far from it. However, you must proceed cautiously. You must be among the smart ones.

What are the main challenges associated with this sort of scaleup, then?

❗ You must invest.

Investment is the most evident requirement since to scale up, most small firms nowadays require substantial investments, typically from venture capitalists. Series B or C financing is frequently used for this.

Early fundraising rounds are used to construct the MVP and determine market fit; if more investment can be obtained, it will be utilized for rapid growth.

❗ Scalable procedures are required.

The typical scaleup has a product that scales effectively, appealing to a much larger market of consumers than the one now being served. However, many internal procedures aren’t scalable because they developed swiftly as a company.

Company expenditure rules are the most prominent example of this. You don’t need an expenditure policy if your business is still modest. Someone may immediately arrange anything with the founders if they need to travel or make a purchase. However, this is no longer an option once you have many offices and a sizable group of individuals travelling simultaneously.

❗ You must establish a business culture.

Startup companies typically have a natural culture. The majority of your staff has the same objectives and passions, you carefully choose your hires, and everyone is seated in the same space.

However, this becomes much more difficult to manage after you travel abroad. New team members don’t have the same closeness with you and are less able to absorb the spirit and values of the existing group.

Scaleups must thus consider their personnel onboarding approach very carefully. Now is the best time to communicate the company’s mission, instil its fundamental values, and ensure that new personnel are a perfect match.

❗ Workers require autonomy, but managers need control.

This should serve as a guiding principle for all firms, but it’s imperative during the difficult scaleup era of adolescence. Managers and HR teams must be able to trust that their team members are conducting business properly because they suddenly have much less visibility over them.

Since there are now so many new employees to train, it is more complicated than ever for team members to seek assistance from management and human resources. And again, they may be operating in different countries.

Without reliable scaleup software, this dynamic is challenging. It is possible to decentralize information while retaining central control using online payroll tools, expenditure management, and productivity solutions.

How to scale a company

It is difficult to provide the recipe for exponential business expansion. Nevertheless, there is helpful advice for people searching for hints and pointers.

👉 Spend money on corporate culture.

Scale brings in a wave of fresh talent, which is fantastic! However, most startup executives spend years meticulously establishing a solid business culture, so you must be careful not to let it go.

Core values may be obscured or lost while scaling. Reaffirming your commitment to those principles will help you draw in the finest personnel, get superior technology for handling and analyzing your financial data, and specify precisely how to continue scaling.

👉 Remove yourself from the little details.

If you want to take your business to the next level, you’ll have to stop wasting time on trivia. Executives have to shift their focus from trying to save every penny to start thinking about the company as a whole.

Simply find someone! You’ll discover that they perform these things better and more effectively than you do.

What do you think will happen? Now, you can devote your attention to the areas of the company that call for your particular skill set – the things in which you excel!

👉 Emphasising your strengths

It’s alluring to think that diversifying your business can help you scale. New product lines and services can bring in a flood of new income.

But If a company expands by ad hoc decisions and activities, things tend to fall apart as the company grows. Small spaces will widen into chasms. Chaos results from uncertainty and inconsistent behaviour. Additionally, providing a consistent product or experience is impossible if staff members follow their playbook. ‍

A degree of repeatable and predictable systems is necessary to achieve scalability. Companies can increase their consumer base from a few thousand to millions by establishing and improving these systems.

👉 Spend money on process management.

Process management is similar to outsourcing in that you must delegate the little tasks. Ensuring that procedures are recorded, and others may use them without step-by-step instructions is crucial.

As a small business owner, you likely have open contact lines with every employee. However, as your company grows, you must focus on strategic issues and delegate responsibility for running the day-to-day operations of your company to others.

Grow, scale, and succeed.

Hopefully, this post clarifies the subtleties of scaling and growing. Both are critical, and timing frequently makes a difference for businesses.

As we’ve seen, however, there are concrete measures that companies may take to ready themselves for expansion. Create transparent (digital) procedures, make data accessible from anywhere, and minimize the need for personal interactions.

After that, successful growth requires some preparation, some work, and plenty of luck.